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Financing Your Home: Your Fair Housing Rights

by: Greater New Orleans Fair Housing Action Center, Inc. (FHAC)

What can I expect when I apply for a loan to buy a house?

Before you apply.

You are entitled to the same range of loan products as anyone else with your financial qualifications. A lender should be happy to talk with you about all the loan products they have available, and what is needed to get the loans. Unless it is clear from talking with you that you could not get any of their loans (for example, you may not have enough money for a down payment or enough income to afford a loan), a lender should be helpful and should encourage you. A lender should give you information about how to apply for a loan, and what to bring with you when you come.

Some general information about lending.

Banks, mortgage companies, credit unions, and savings and loans all make mortgage loans. And they all have the same goal - to lend money to people who are going to pay it back on time. They will all require proof of enough income and a history of paying your bills, so that they can know if you are a good risk. They will need proof that the house you are buying is worth what you are paying for it. But they should be able to tell you exactly what their standards are. They should talk to you about:

The percentage comparing your monthly income to the size of the monthly mortgage payment, which includes principal, interest, taxes and insurance (PITI). This is called the "front end debt-to-income ratio (DTI)."
The percentage comparing your monthly income to all your monthly debt, including the mortgage payment. This is called the "back end ratio."
What a reasonable credit history is.
How much money is required for closing and how much cash they want you to have left over.

Each institution may offer many different loan "products," with different requirements, such as how big a down payment you will have to make. "Conventional" loans usually have a lower rate, but you need a larger down payment. Government-insured loans, such as FHA, VA, or USDA Rural Development loans, cost more over the long run, but may require only a very small down payment.

Filling out the loan application.

A lender will ask you for a lot of information and documentation about your finances. Be prepared.

You will have to decide what kind of loan to apply for. A lender should give you enough information to decide this for yourself. If a loan officer, without asking you, decides you want one kind of loan (such as an FHA loan), there may be a problem with your lender. If you suspect your lender is making an assumption about what kind of loan is best for you based on your race, sex, disability, or any other protected basis, that may be illegal discrimination.

The loan officer should:

Help you fill out the application.
Ask you questions to help you remember things that may help you (like having savings bonds or other assets).
Ask you questions so you can explain things that might be problems (like late payments on your credit history).
If you have too many debts to qualify, the loan officer should find out when they will be paid off. Short-term debt should not be counted against you.

What happens after I apply?

You wait. Loan processing is never quick. Unless there are problems, you should hear something in 3-6 weeks. If interest rates are really low and the lender is very busy, it can take even longer. During this time, the lender may ask you for more information. If this happens, give it, but keep a record of what you were asked for, and when. Also, when you give this extra information, send it with a letter. The letter should say what extra information you are giving, why you are giving it, and when. For example, you could say: "As you requested in your [date] letter, enclosed is a copy of my tax forms for 1995."

What if my loan application is denied?

Find out why you were turned down. Write down everything you are told and who told you. Make sure you get a copy of your "adverse action" letter. By law, the lender must send it to you within 20 days of the denial. The letter must give all the reasons why you were turned down. If credit is the problem, get a copy of your credit report. If the appraised value of the house came in too low, get a copy of the appraisal. The law requires the lender to give it to you if you ask for it in writing.

There are many valid reasons to turn someone down for a loan. These include poor credit, not enough income, or too many debts. Not every denial or delay of a loan application is discrimination. But, be concerned if:

You are denied a loan when you think your credit is good;
You are denied a loan when you can explain a past credit problem; or
You are denied a loan for any OTHER reason than your income, debts, or credit history.

What could be discrimination?

It is against the law for someone to deny you a loan to buy, repair or refinance a house - or to charge you more because of your race, color, religion, national origin, sex, disability or family status. These are some examples of treatment that might be illegal discrimination:

A lender discourages you from even applying for a loan, no matter how nicely they put it.
A lender makes negative statements or a denial just based on the neighborhood, not the value of a house.
A lender decides you want one kind of loan, such as an FHA loan, before seeing your qualifications.
A lender does not help you make your best case when applying for a loan.
You experience long delays and repeated requests for more information.
A lender changes the terms and conditions of the loan, such as raising the interest rate, offering you an adjustable rate when you wanted a fixed rate, asking you for a larger down payment, or changing a 30 year loan to a 20 year loan.
A lender refuses to make loans under a certain amount, such as the cost of your house.
You receive a low appraisal that talks about the neighborhood, or the age of the house.

What should I do if I think I've been discriminated against?

Take notes.

Try to get everything in writing. Then call the Greater New Orleans Fair Housing Action Center (GNOFHAC). GNOFHAC may be able to investigate the problem by sending testers, or mystery shoppers, to the lending institution to see if everyone is treated the same way. GNOFHAC will go over your qualifications and finances to see what the problem might be. GNOFHAC will also explain how the law protects you from discrimination, and the different options you have for addressing discrimination when it does happen.

You can reach GNOFHAC at 504-596-2100 or toll free at 877-445-2100.

If discrimination is proven.

Every situation is different. But here are some possible results:

You may get a loan at a favorable rate.
You may be paid for the extra money you had to spend because of the discrimination.
You may be paid for the pain, suffering, and humiliation you and your family felt because of the discrimination.
The lender may be forced to attend fair lending training and to change the way it does business.

The lender may have to make a special effort to make loans to the type of people who were illegally denied loans.


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	Last Reviewed On: 10/31/11

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